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Not all businesses have benefited from the Nasdaq Composite Index 's 15% total return since the start of 2023. Even those with seemingly promising product offerings have been struggling mightily.

Just look at Upstart (NASDAQ: UPST) . The tech-focused lending platform's shares, while soaring almost 60% in the past few days on better-than-expected second-quarter results , still trade 90% below their all-time high.

Besides the stock getting crushed, here are other reasons why I wouldn't touch this fintech stock with a 10-foot pole.

Mixing AI with finance

To be clear, what Upstart has accomplished thus far deserves a round of applause. The company aims to expand access to credit for more people, particularly those who might be shut out from traditional banks. Since its founding in 2012, Upstart has originated $39 billion worth of loans.

Artificial intelligence (AI) underpins this business model. Upstart looks at 1,600 unique variables about a person before making a lending decision. The FICO model, which has been in place for decades, only considers five key variables. By gaining a more thorough understanding than what the FICO model examines, Upstart claims that it can approve more borrowers and keep losses in check.

Upstart is the perfect example of a business mixing AI with financial services to better serve consumers.

Upstart's red flags

Investors will find no shortage of reasons to pass on the stock. The company's disappointing financial performance is one major red flag.

Upstart registered unbelievable growth in 2020 and 2021, and it was even posting positive-net income. The bull market in 2021 helped drive the stock to new heights. At one point in mid-October, shares were up an eye-watering 857% that year.

But starting in 2022 is when Upstart's cracks started to show. This business has revealed to investors that it demands low interest rates in order to succeed. When the Federal Reserve aggressively started raising rates in an effort to slow down inflation, Upstart faced the headwind in troubling fashion.

The growth has turned negative. Revenue and loan volume of $514 million and $4.6 billion, respectively, in 2023 were both down more than markedly from two years before. Through the first six months of this year, the top line has somewhat stabilized compared to the same period in 2023. But Upstart continues to report sizable net losses.

Upstart's management team touts the huge addressable market the business is attacking. Consequently, I can understand why growth-minded investors looking for a venture-style bet would gravitate to this AI fintech company. But there's just too much uncertainty to Upstart's long-term outlook.

The company is incredibly cyclical, which is not what you want to see from a tech-enabled business. Other fintech enterprises have still been able to grow rapidly while also achieving bottom line profitability. Based on the past few years, investors need to be critical and ask if Upstart can not only consistently increase its revenue and loan volume but also produce positive earnings and free cash flow year in and year out.

Are there better days ahead?

Investors who have a pulse on the state of financial media might counter all my negative arguments against Upstart by saying that U.S. monetary policy is going to shift, and interest rates are set to start declining . That may or may not be the case. But it's easy to be optimistic about demand and funding for Upstart-powered loans to pick up in a more accommodative backdrop.

However, if it requires you to correctly predict macroeconomic changes ahead of time for a stock pick to work out, then perhaps that's the brightest red flag telling you it's best to avoid the business.

Before you buy stock in Upstart, consider this: